Costs of quality analysis. Dream Rider produces car seats for children from newborn to two years old.
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Required
1. Calculate appraisal cost.
2. Calculate internal failure cost.
3. Calculate out-of-pocket external failure cost.
4. Determine the opportunity cost associated with the external failures.
5. What are the total costs of quality?
6. Dream Rider is concerned with the high up-front cost of inspecting all 250,000 units. It is considering an alternative internal inspection plan that will cost only $1.00 per car seat inspected. During the internal inspection, the alternative technique will detect only 5.0% of the 250,000 car seats that have stitching problems. The other 7.0% will be detected after the car seats are sold and shipped. What are the total costs of quality for the alternative technique?
7. What factors other than cost should Dream Rider consider before changing inspection techniques?
Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0132109178
14th Edition
Authors: Charles T. Horngren, Srikant M.Dater, George Foster, Madhav
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